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Binh Duong remains attractive to foreign investors

The southern province of Binh Duong attracted 59 foreign direct investment (FDI) projects in the first 10 months of this year, a local official told a conference on November 19.

During the period, 23 FDI projects in Binh Duong also increased their capital, while 155 others contributed capital or purchased shares with total registered investment exceeding 1.9 billion USD, according to Vice Chairman of the provincial People’s Committee Mai Hung Dung.

As of October 31, the province counted 4,008 projects worth 37 billion USD from 65 countries and territories, ranking second nationwide in FDI attraction, only after Ho Chi Minh City.

Binh Duong has set up cooperative ties with 10 foreign cities and provinces, and become an official member and a reliable partner of the Intelligent Community Forum (ICF), the Horasis Asia Meeting and the World Trade Centres Association (WTCA), Dung said at the online conference that sought ways to lure more investments from Taiwan (China).

He affirmed that after the COVID-19 pandemic was brought under control, Binh Duong has entered the “new normal”, restored socio-economic activities and further invested in infrastructure to better serve domestic and foreign investors.

Binh Duong always pays attention to creating the most favourable investment climate, and stands ready to cooperate with Taiwanese investors, he said.

Currently, the province is calling for investments in high-tech, environmentally friendly sectors that can create high added values, as well as financial services, logistics, support industries, high-tech agriculture and science-technology.

Briefing the participants on Binh Duong’s economic development over the past time, the official said the province wishes to welcome and have in-person working sessions with foreign investors in 2022 when the pandemic is completely contained.

Dung said Binh Duong hopes to continue receiving cooperation from relevant Taiwanese agencies and associations in the time ahead./.

Major industrial complex under construction in Binh Thuan

A major cluster of three large industrial parks worth over USD 2 billion are under construction in the southern central province of Binh Thuan’s La Gi Town and Ham Tan District.

One of the projects is the Becamex VSIP Binh Thuan Industrial, Service and Urban project in La Gi Town and Ham Tan District, covering nearly 5,000 hectares and worth VND18.84 trillion (USD 820 million). This is a joint venture project between Becamex IDC Corporation of Vietnam and Singapore’s Sembcorp Development Group. La Gi has attracted a series of billion-dollar projects and is becoming the largest economic centre in southern Binh Thuan.

The second project is the 300-ha Tan Duc Industrial Park in Ham Tan District and La Gi Town which is invested by Sonadezi Binh Thuan JSC with an investment of VND1.20 trillion (USD 53 million). This project is scheduled to start construction in 2022.

The third project is the LNG gas-fired power project near Ke Ga Cape invested by the US’ AES Group. This project has a total investment of USD 1.31 billion which is the largest FDI project in the province so far.

To create favourable conditions for the development of La Gi Town, local authorities are building two roads running from the Dau Giay-Phan Thiet Expressway through Ham Tan District to La Gi. The roads will help shorten travelling times from HCM City to La Gi to one and a half hours and from Phan Thiet Airport or Long Thanh Airport to La Gi to an hour.

Binh Thuan Provincial People’s Committee has also approved a plan to upgrade La Gi Town to La Gi City and develop it into a key provincial economic centre.

Positive outlook ahead for Vietnamese FDI attraction

Foreign direct investment (FDI) attraction in Vietnam is expected to peak up steam in the coming months following several foreign investors’s decisions to inject huge amounts of capital into a number of major projects across the country, according to industry insiders.

Notably, the Republic of Korea (RoK)’s SK Group moved to pour US$340 million into acquiring a 4.9% stake in The CrownX, which owns the WinMart and WinMart+ store chains, further affirming its keen interest and major ambitions in Vietnam.

De Heus Group of the Netherlands also acquired Masan’s entire animal feed production segment as a way of expanding its factory chain in the country to 22, officially becoming the country’s leading animal feed manufacturer with total investment reaching up to VND4 trillion.

Explaining the reasons, Gabor Fluit, general director of De Heus Asia, said Vietnam is a potentially lucrative market in Southeast Asia boasting a high economic growth rate among the group of developing countries. In addition, it has signed numerous bilateral and multilateral free trade agreements (FTAs), with 14 of them currently in force. 

Among other investors, Kurz Group of Germany recently decided to invest US$40 million in constructing a coating and thin film technology factory in Becamex VSIP Binh Dinh, while the RoK’s Amkor Technology, Inc planned to funnel US$1.6 billion into a semiconductor manufacturing plant in Bac Ninh.

Authorities in Quang Tri have agreed to allow the consortium of investors SSF Investment Co., Ltd., Sunshine Homes Development JSC (SSH) and Truth Assets Management from Singapore to conduct a survey for exploring investment in three projects in the Cua Viet maritime area.

Elsewhere, Denmark’s Orsted Group proposed investing in an offshore wind power project in Hai Phong, with the site set to feature a total capacity of 3,900 MW and investment capital reaching between US$11.9 billion and US$ 13.6 billion.

Statistics compiled by the Foreign Investment Agency indicate that newly and additionally registered FDI capital in Vietnam over the past 10 months increased by 15.8% annually, which reflects foreign investors’ trust in the country’s economic recovery from COVID-19 in the short term.

Prime Minister Pham Minh Chinh, during his speech at the National Assembly’s year-end session, affirmed that despite the impact of the COVID-19 pandemic foreign investors have placed trust in Vietnam’s improved business and investment climate. He said besides transparent preferential policies, political stability and a young, abundant labour force are Vietnam’s advantages in attracting foreign investment.

Recently the UK market research company IHS Markit expressed its optimism about Vietnamese economic recovery thanks to a number of factors, including its low labour costs and and an abundant and qualified workforce compared to regional competitors.

Experts said Vietnam remains an attractive investment destination in the future, as several foreign firms are moving their production lines to nations in Asia, and a number of multinational companies are seeking to diversify their production supply chains.

Vietnam setting sights on medicinal herb scale-up

The reopening of the Chi Ma-Ai Diem border gate in Lang Son last month to import medicinal herbs and raw materials from China is putting pressure on the implementation of domestic production of similar products.

Si Ma Cai Himalayan ginseng tea is one of the specialities of Lao Cai province, selling particularly well as consumers have been paying more attention to health issues during the last few years. “We could only supply about 1,000 boxes since July 2020. The harvest from Man Than’s garden, of which than one hectare is used for ginseng, is not enough to produce more tea,” said Vu Thi Nhung, director of the Man Than Cooperative in Si Ma Cai.

Last year, Nhung had to re-evaluate the efficiency of her hollyhock plantation and compare this with her investment. Meanwhile, the imports of sage, one of her raw materials, were increasing, and thyme became scarce.

Nhung, the first woman to begin growing hollyhock in Lao Cai province, decided to expand her plantation for sage in Quan Ho Than commune, from 3,000sq.m to a hectare. She reserved a part of it as a nursery to provide seedlings for farmers in the area and committed another part to sales.

Her bet paid off last year. As the pandemic broke out, the Chinese government ordered suspension of customs clearances at all border gates with Vietnam, causing local businesses to rush to find alternative sources for medicinal herbs. Nhung had never sold so much tea and powdered shiitake before this time.

As trade flows were diverted, more farmers in Lao Cai began to grow medicinal herbs, following the demand of domestic enterprises. The area of ​​medicinal herbs in this province has increased to 2,300ha as of June, an increase of 2.5 times compared to 2016, according to data from the Lao Cai Department of Agriculture and Rural Development (DARD).

The imbalance in the pharmaceutical supply system of Vietnam has led to rising imports of medicinal materials. Vietnam’s demand for medicinal herbs stands at about 60,000 tonnes per year, but the domestic growing areas can only supply about 15,600 tonnes per year. The rest must be imported from abroad, according to Vietnam’s Ministry of Health (MoH).

The demand for medicinal herbs continues to increase following the strong growth momentum of the local pharmaceutical market, the MoH wrote in a report on developing the pharmaceutical industry with domestically produced medicinal herbs towards 2025.

The total value of Vietnam’s pharmaceutical market meanwhile increased from $2.7 billion in 2015 to $3.6 billion in 2018, a compound growth rate of 10.6 per cent. Between these years, the total value of the pharmaceutical industry grew at a compound rate of 10.6 per cent from $600 million to $800 million, creating 7,300 more jobs.

By 2030, Vietnam wants to become a high-value pharmaceutical production centre in the region, with the export value of domestically produced drugs reaching about $1 billion. Previously, domestically produced drugs would reach 75 per cent of the quantity used and 60 per cent of the market value, with the rate of domestic consumption of herbal medicines increasing by at least 10 per cent compared to 2020.

To serve Vietnam’s goal by 2030, the government aims to increase the area for sustainable exploitation of natural, medicinal herbs large-scale production according to the Good Agricultural and Collection Practices of the World Health Organization.

Meanwhile, Lang Son Customs Department is considering setting limits for the import of medicinal herbs through the Chi Ma border gate. “To control the quality up until October 2023, the department will take samples of all imported medicinal herbs for phytosanitary purposes and to identify the origin of the goods,” said the department’s deputy director, Vi Cong Thuong.

In many Vietnamese provinces where medicinal plants are grown, the cultivation method is mainly based on extensive experience, but not yet associated with the market conditions. Many farmers in Dak Nong had to cut down their ginseng and cloves gardens and switch to other industrial crops.

Though importing through the Chi Ma border gate, many pharmaceutical enterprises are becoming increasingly aware of the supply dependence on China, and target to expand the domestic growing area.

Tran Binh Duyen, general director of Vietnam Medicinal Materials JSC, had many working sessions with local leaders on the development of herbal medicine areas according to international standards. Duyen thinks that “expanding the plantations could be a great way to reduce imports from China to below 75 per cent of the present amount.”

Farmers can earn a decent income from growing medicinal plants, about $4,300 per hectare, especially as the value of many types of medicinal herbs can be increased by 10-15 per cent after processing, according to calculations by the Lao Cai’s DARD.

Nhung of the Man Than Cooperative hopes that the situation does not change suddenly. However, “the Si Ma Cai tea production is expected to increase next year, especially when Man Than improves its supply of Himalayan ginseng,” Nhung said.

Rules set to benefit medical suppliers

Domestic and international medical device suppliers will enjoy more favourable conditions for trading activities in Vietnam from early next year, expecting to put an end to a long-lasting price turmoil in the local market.

The Vietnamese government on November 8 issued Decree No.98/2021/ND-CP on the management of medical devices, which officially adds these to the list of goods subject to price declaration and allows state agencies to ask businesses to explain price components when necessary.

Accordingly, marketing authorisation will be changed from pre-check to post-check, while administrative reform will be intensified and measures on price management will be added to facilitate price declaration. The process includes prime cost of imported goods or prime cost of production, management cost, training cost, estimated profit, and final selling price, among others.

For Class C and D devices, the time for granting marketing authorisation will be reduced from 60 to 10 working days if these devices are licensed for circulation in the US, Australia, Japan, and Canada.

Medical devices in Vietnam are classified in terms of risks in accordance with the ASEAN Medical Device Directive, which lists four classes from low risk (Class A) to high risk (Class D).

The new decree also removes some conditions and procedures in administrative processes, as well as simplifies some procedures for businesses. For example, it simplifies the requirements on manufacturing, sales, and consultancy towards removing direct submission of paperwork to state agencies and allows businesses to make online registrations.

In addition, the validity of circulation numbers will be revised towards allowing an unlimited time, instead of five years as it did in the past. Thus, medical equipment enterprises will not have to carry out procedures for an extension. They must, however, update relevant documents when they make changes in circulation.

Also importantly, Decree 98 supplements measures for medical device price management to solve the existing problems related to price variation in winning tenders among health facilities, and when there is no reference price for the building plans on the selection of contractors.

Coming into effect from January 1, the new rules are aimed to increase transparency in the local market and prevent wrongdoing. Vietnam has seen some serious issues in medical device purchases, with the latest scandal being related to alleged illegal profiteering in medical equipment purchases at the state-run Bach Mai Hospital.

Multinational corporations, including brands like Abbott Diagnostics, B. Braun, Bayer, DKSH, GE Healthcare, and Roche Diagnostics are expected to benefit from the new rules. They are among the 26 global group members of EuroCham’s Medical Devices and Diagnostics Sector Committee (MDDSC) responsible for most of the $2 billion market.

After more than 25 years, Abbott has built stable business growth. The company has broughts to Vietnam some innovations in nutrition, medicines, diagnostics, and medical devices.

Likewise, B. Braun is said to be working on its expansion in Vietnam, with the relocation of its Hanoi factory being among its main focuses. B. Braun has some manufacturing sites for medical devices in the country, with 20 per cent of total production assigned for its domestic consumption.

The company is working in exchange with hospitals to directly deliver equipment to them and hopes that these processes will be more convenient once consistent policies are in place.

According to the MDDSC, Vietnam’s medical devices and diagnostics market has had double-digit annual growth in recent times, with 90 per cent made up of imports, which stimulated companies to better serve the market through investments in a solid local network of partners. This has involved the setup of representative offices and, very often, the creation of local Vietnamese branches employing and training highly qualified local experts.

With the EU-Vietnam Free Trade Agreement in force over the past year, further improvements of regulatory standards, information exchange on customs requirements, and investments in the modernisation of customs procedures have come. It is forecast that the local market will become even more bustling as more multinationals are expanding to and in the market.

Manufacturers proactive in ensuring continuity for industrial zone operations

Manufacturers are taking the initiative in building isolation areas in industrial zones as an effective solution to avoid the spread of coronavirus and evade manufacturing disruption.

Amata Group, the developer in Amata Bien Hoa Industrial Park, has spent over $130,000 transforming one facility into a temporary isolation place for F1 and F0 coronavirus cases detected through the rapid test method.

Covering an area of 1,500 square metres with 200 spare beds, the temporary isolation area is equipped with full facilities for daily living and emergency equipment such as oxygen bottles and monitoring machines.

The park is a manufacturing hub for 170 multinational manufacturing companies with a workforce of more than 60,000 people. Thus, Amata’s leaders decided to focus on ensuring production safety and supporting its customers.

Nguyen Van Danh, deputy head of Dong Nai Industrial Zones Management Authority (DIZA), said Amata’s case sets a strong example for industrial zone (IZ) developers in supporting enterprises to maintain stable operations. To date, 31 such IZs in the province have resumed operations, and 29 of them have arranged temporary isolation areas for workers infected with COVID-19.

According to Danh, the temporary areas are renovated from facilities, offices, and technical housing and cover a total area of ​​more than 87,000sq.m and capacity of over 10,000 beds. Employees who are detected to have COVID-19 infection after rapid testing can be placed in temporary isolation areas while waiting for healthcare authorities to take them for treatment.

Statistics from the DIZA show that to date, approximately 1,660 of the total 1,700 enterprises in the province’s IZ resumed operations and 525,000 employees have returned to work (equalling 86 per cent) after nearly three months of social distancing.

“Having new COVID-19 cases in IZs when enterprises resume operation is understandable but we are determined to stay safe during the pandemic, and the most importance is to limit its spread,” Danh said. “Almost all employees live in rented houses with their families, thus the risk of community transmission is high. Maintaining temporary isolation areas in IZs is necessary because it helps businesses isolate cases, avoiding confusion for workers and some operation disruption.”

The strategy to build temporary isolation areas has reached other localities, including Ho Chi Minh City. Earlier this month, Saigon High-tech Park (SHTP) officially started to operate its own areas and received workers who have mild symptoms or are asymptomatic with underlying diseases. It also aided people who are not eligible for self-isolation at home.

Le Thi Bich Loan, deputy manager of SHTP, said that the first facility has a scale of 100 beds, fully equipped with essential utilities such as televisions, refrigerators, Wi-Fi, and gym rooms.

A second facility located in Linh Trung Export Processing Zone 2 in Thu Duc, with 250 beds, is also being installed. The management board of SHTP has plans to establish a third facility in another IZ located in Cu Chi district, with up to 300 more beds.

“This is a non-profit activity and does not use the state budget. Entire costs for establishing facilities and installing equipment and machinery are contributed by enterprises in SHTP in order to take care of employees and ensure stable operation,” Loan said. 

Stable figures for M&A as groups rebuild

Dealmaking in Vietnam is showing signs of recovery after a subdued year, and domestic figures are even surpassing pre-pandemic levels.

Masan Group Corporation (HSX: MSN) and SK Group last week inked agreements to purchase secondary shares of The CrownX for $345 million in cash, with SK Group contributing $340 million. Masan will own 85 per cent of The CrownX after the deal is completed, while SK will own 4.9 per cent, with Masan potentially increasing its stake in The CrownX in the near future.

Over the past few years, Masan has been the most active player in Vietnam’s merger and acquisition (M&A) scene. It has actively scooped up numerous businesses such as VinMart+, Phuc Long Kiosk, and Mobicast JSC, a startup mobile virtual network operator, to scale up The CrownX’s mini-mall, Point-of-Life concept.

On November 5, Masan MEATLife announced the signing of strategic agreements with Dutch-backed De Heus Vietnam, pursuant to which De Heus will obtain control of the feed business and invest $600-700 million in Vietnam’s animal protein supply chain.

Last week, KIDO also announced that it has spent more than $52.98 million buying more than 44 million shares or 36.3 per cent stake in Vietnam Vegetable Oils Industry Corporation (Vocarimex) from State Capital Investment Corporation. Following the deal, KIDO has increased its ownership from 51 per cent to 87.29 per cent in Vocarimex.

According to the latest report by international law firm White & Case, Vietnam’s M&A market for this year is set for another robust year following 2020’s potent performance. In the first three quarters of 2021, deals with disclosed value totalled $3 billion. With one and a half months of dealmaking left in the pipeline, 2021 is on track to overtake 2020’s annual total of $3.9 billion.

This strong performance was largely due to an active second quarter. The total volume of deals came to 19 during the quarter, reaching the highest quarterly volume on record. A quarterly deal value of $2.5 billion, meanwhile, marked the second-highest quarterly value on record, below the $5.2 billion struck in the fourth quarter of 2017.

Although dealmaking dipped in the third quarter after a wave of lockdowns, Jon Bowden, partner of US law firm White & Case, said that the endurance of Vietnam’s dealmaking in the face of ongoing disruption displays both market resilience and an enduring appetite for local assets. “Strong underlying fundamentals such as an educated, low-cost workforce, a burgeoning middle class, and a stable political climate will continue to make the country an attractive investment destination,” Bowden said.

He added that high-growth industries such as consumer finance, electronics, and retail will continue to attract attention from both strategic and private buyers, providing plenty of opportunities for dealmaking in the final quarter of the year. The easing of restrictions in October and the ongoing vaccination programme will only further boost the country’s recovery.

On the same note, Vu Thi Que, chairwoman of Rajah & Tann LCT Lawyers, told VIR, “All enterprises should have realised that they will need to strengthen cooperation, rebuild strategies, and transform and innovate business models due to the emergence of new business needs, policy changes, and consumer demands.”

M&A transactions appear to be more active in sectors that have been seriously affected by the pandemic. Specifically, the real estate business was mostly frozen but acquisitions in this area, especially industrial and hospitality real estate, have become very active, focusing on up to 40 per cent of M&A deals.

Que added that there is an increasing number of domestic enterprises participating in M&A. Only 18 per cent of Vietnamese enterprises were buyers in 2018, but during 2019-2020, the rate rose to 30 per cent.

Enterprises have tended to restructure their business by cooperation and association – 9 per cent of joint ventures and 11 per cent of mergers in the period of 2019 to 2021, according to Que.

On the other hand, 45 per cent of M&A deals are operating in one relevant market, 19 per cent are involving enterprises operating in different related markets, and 36 per cent are mixed transactions.

“Having said that, M&A in Vietnam will continue to grow strongly under the impact of COVID-19, but with a strategy of a chain link, business model transformation, and business expansion rather than an acquisition or a merger. M&A deals after this long pandemic year will likely turn more to the form of cooperation and association for more sustainable growth,” she stressed.

Capacity for maximum growth in rooftop solar arena

Mergers and acquisitions in the solar energy sector in Vietnam are expected to rise in 2022, reflecting the country’s economic fortunes, since the country has a lot of potential for solar energy due to its geographical location. In addition, as a consequence of global supply chain adjustments and the country’s overall trend of rapid development, Vietnam’s prominence has risen.

The Ministry of Industry and Trade has said that the economic concentration filing by Sojitz Osaka Gas Energy Co. (SOGEC) and LOOOP Inc. is not prohibited under Article 30 of the Law on Competition.

The pair are considering forming a joint venture to promote and expand the rooftop solar power industry in Vietnam, as stipulated by the law. SOGEC will contribute 70 per cent of the charter capital while LOOOP will contribute the remainder. The venture’s area of operation will include the provision of energy generated by solar photovoltaic (PV) systems that it purchases and installs on the rooftops of industrial or commercial clients’ buildings, as well as industrial zone (IZ) businesses and tenants in Vietnam.

SOGEC is a subsidiary of Sojitz Corporation, a Japanese multinational corporation with operations in several countries. Sojitz has subsidiaries and related businesses in a variety of industries in Vietnam, including selling industrial machines, IT, fertiliser manufacturing, logistics services, and gas, as well as creating wood chips and developing IZ infrastructure.

LOOOP is a Japanese business that specialises in the manufacture and marketing of solar panels, as well as the sale, maintenance, and repair of solar modules and related equipment. In contrast, LOOOP has never done business in Vietnam.

The joint company will purchase solar PV systems from worldwide suppliers and install them on the roofs of industrial clients in IZs that demand rooftop solar power. Following that, it will continue to own and maintain the rooftop solar system, selling the electricity generated to consumers in accordance with the provisions of the two parties’ direct power purchase agreement (PPA).

Rooftop solar is a type of renewable energy produced by a PV system, which has its electricity-generating solar panels installed on the roof of a residential or commercial structure to provide backup power in the event of an outage, accounting for a relatively small fraction of an industrial park’s overall electricity consumption.

Furthermore, the rooftop solar power system contributes to less burden on the national grid while boosting corporate efficiency. It is most visible in business investments, notably manufacturing businesses, as rooftop solar power systems enable these organisations to maximise production capacity while also extending the life of the machinery.

Recently, foreign and domestic investors in the rooftop solar business in Vietnam have finally received significant support and encouragement from the government for development as prescribed under various regulations.

Rooftop solar power is a young, rapidly developing, and fiercely competitive sector, with many new entrants likely to boost total installed capacity soon. Hexagon Peak, Shire Oak International, Skylight Power Ltd., SkyX Solar JSC, and Nami Solar Energy JSC are among the newest rivals to enter this industry.

Several months ago, SP Group and BCG Energy JSC, a fully-owned subsidiary of Bamboo Capital JSC, also announced the formation of a joint venture in Vietnam to engage in rooftop solar and explore additional renewable energy projects.

SP stated that it will hold 49 per cent of the venture, while Bamboo Capital’s wholly-owned subsidiary would possess the rest. By 2025, it will have achieved its initial goal of 500MW of rooftop projects, contributing to Vietnam’s goal of generating 30 per cent of its power from renewable sources by 2030.

In addition, Coro Energy Plc, a Southeast Asia-focused company, announced plans this summer to buy 85 per cent of a portfolio of commercial and industrial rooftop solar projects in Vietnam from Vinh Phuc Energy, with a combined capacity of 150MW. The deal commences with a low-cost entry, starting with a 5MW pilot project.

Stepping up green energy through direct purchase deals

Vietnam-based groups from fashion brands to brewers are likely to miss their global climate change commitments if the long-awaited direct power purchase agreement for them fails to come online next year.

One week after the prime minister offered strong commitments towards the energy transition at the COP26 climate summit, Minister of Industry and Trade Nguyen Hong Dien reported to the National Assembly that a direct power purchase agreement (DPPA) is being urgently implemented as the ministry (MoIT) has asked the government for permission to pilot the mechanism from now until 2025.

“The MoIT is urgently building a competitive electricity retail market. In particular, the implementation of the DPPA between the power plant and electricity users is the first step in implementing a competitive electricity retail market in our country,” Dien said.

The mechanism is an enormous opportunity for solar and wind developers to mobilise private capital to build major new solar and wind farms. Over 30 large international and domestic businesses represented by the Renewable Energy Buyers Alliance Vietnam – including Nike, Adidas, and Puma – are supporting this effort in order to meet their sustainability goals, and emphasised the critical need for accurate power market data to support low-risk transactions to power the clean energy revolution in Vietnam.

Nike’s chief sustainability officer, Noel Kinder, who had a meeting with the Vietnamese Prime Minister Pham Minh Chinh at COP26, said the group is working towards its sustainability targets, including powering its owned and operated facilities worldwide with 100 per cent renewable energy by 2025.

Home of many global groups, Vietnam plays an important role in supply chains. Thus the DPPA, which has been sought after by top names such as H&M, Adidas, and HEINEKEN, would promote private sector investment as well as meet green targets. Meanwhile, these groups are under pressure from shareholders and customers to reduce emissions in their supply chain.

Nearly 30 leading international companies and organisations signed a declaration of support for a DPPA in Vietnam in 2019. However, industry insiders said that the draft has not yet set a floor price for negotiation between the parties. Electricity users want to buy electricity at a low price, but conversely, renewable generators do not want to sell at a lower price than the selling price to state-run Electricity of Vietnam to ensure business efficiency.

Under the draft, the pilot programme is planned for nationwide rollout and a total maximum capacity of selected wind or solar projects of 1,000MW. Should this number exceed the number of applications for this scheme, the MoIT will select participants (both consumers and renewable energy generation companies) on a first-come, first-served basis.

Vietnam aims to double the installed wind and solar generation capacity to 31-38GW by 2030. Thanks to feed-in tariffs and other policies, Vietnam is among the top three nations leading the shift to renewable energy in Asia-Pacific, according to the latest research from London-based information provider IHS Markit. The country saw a staggering eight-fold increase in rooftop solar in 2020 compared to the previous year, driven by the attractive tariffs, tax incentives, and a land-lease exemption scheme.

Meanwhile, Minister Dien said that the policy for the wind sector will transfer to an auction step after applying the FiT mechanism set at 8.5 US cents per kWh for all projects achieving commercial operations before November 1 this year.

It was deemed an impressive result after the rush to invest in wind to take advantage of the government’s incentives before transitioning to a competitive auction scheme as wind projects totalling nearly 4GW have achieved commercial operations in time for the feed-in tariff before October 31.

Coastal provinces shape up for real estate rejuvenation

The hospitality real estate segment in some famous tourist destinations in Vietnam are showing positive signs of recovery in anticipation of a reopening of the country for international tourists.

In the past two years, real estate prices in the central city of Danang and and the central province of Quang Nam have decreased by about 15-20 per cent, while many other areas have seen a drop of up to 35 per cent compared to 2019. But according to Nguyen Xuan Binh, deputy director of the Danang Tourism Department, hospitality real estate could be boosted with the city now on the list of five destinations allowed by the government to start a pilot to welcome international visitors.

“Welcoming international tourists back to Danang on a safe route will contribute to boosting the real estate market and Danang’s tourism in particular,” Binh said.

The pandemic has caused 98 per cent of tourism businesses in the city to suspend operations. Accommodation, riverside, and coastal real estate have all since been in a state of hibernation.

Representatives from real estate businesses forecast that the hospitality real estate market in both Danang and Quang Nam will have cautious growth for now, but perhaps even a boom period in 2022.

Nguyen Ngoc Thuy Linh, general director of Sun Property Group, insisted that Danang’s real estate market will soon rise thanks to tourism and the increasing quality of life.

“Last year the prime minister approved the adjustment of the general planning of Danang to 2030. The related projects will be gradually implemented, and many existing problems for real estate such as a shortage of supply and lack of new projects will be solved,” Linh said.

Linh added that 2022 will be the right time for Sun Property Group to develop more luxury and hospitality real estate segments.

The recovery of tourism will also lead to positive recovery signals of hospitality real estate in other destinations on the pilot list to open to international visitors – Phu Quoc, Nha Trang, and Quang Ninh, as well as other beaches which are famous for many luxury resorts, such as Phan Thiet and Vung Tau.

Nguyen Van Dinh, chairman of the Vietnam Association of Realtors (VARS), said land prices in coastal cities have increased sharply and are at a high level. Areas near the sea in Danang and Nha Trang can cost up to $15,000 per square metre, but some other locations like Quang Nam have a more reasonable price of about $1,300-2,000 per sq.m.

“The recovery of the tourism economy will open up good opportunities for investors in the hospitality real estate segment, and at the same time promote the market to be vibrant again,” Dinh said.

The number of hospitality real estate products in the country is still quite modest. According to data from the VARS, in 2020 there were 216 new tourism complex projects approved and constructed in 10 cities and provinces along the coastline, consisting of approximately 100,000 condotel units, 30,000 villas and resort villas, and over 15,600 shophouses. But among the latter, only 5,000 shophouses have been put into operation.

There is light at the end of the tunnel, according to a report from the VARS. Despite the pandemic, the hospitality real estate market in the third quarter gained a positive transaction volume. The number of products offered for sale in the quarter reached 7,206 units and transaction volume reached 2,280, equivalent to an absorption rate of 31.6 per cent.

However, to serve the goal of welcoming more than 50 million international tourists and nearly 200 million domestic tourists by 2025, Vietnam is required to invest in developing more resorts, giving priority to famous coastal tourist destinations such as Quang Ninh, Phu Quoc, Binh Thuan, Danang, Nha Trang, and Phan Thiet. 

Smart cities the biggest game for startups in Vietnam

A smarter lifestyle that caters to the citizens of the 21st century and helps protect the planet and stands high on Vietnam’s agenda in urban development, opening many chances for local and foreign-funded startups in the country.

Many fresh startups have been developing tech solutions in logistics and supply chain management and transport improvement, offering convenient solutions to serve customers and contributing to establishing smart cities in Vietnam.

Founded three years ago, VIoT JSC is a tech startup focusing on solving the problems of smart city development.

The company is producing a range of products, such as smart buttons with Bluetooth and connectivity systems for outdoor and indoor advertising signs, serving urban authorities in managing digital content remotely, such as in an industrial zone, a port, and even a whole city.

Nguyen Bach Viet, founder and chairman of VIoT, said that using smart technology, his group embarked on researching sensor devices for street lights on an open platform for centralised management to reduce greenhouse gas emissions and solve energy problems.

“With this technology we are contributing to the digital transformation of infrastructure, developing applications for smart cities, agriculture, and factories,” Viet said.

Vietnam’s urban areas are developing extremely quickly. Figures from the Ministry of Construction show that the country’s urbanisation rate now is at 37.5 per cent, and it has more than 813 cities and urban areas nationwide.

This is considered a good sign for economic development, creating conditions for more innovation and investment, but also poses challenges such as environmental pollution and traffic congestion.

By applying technology, cities are expected to increase management efficiency, reduce costs, be more transparent, and bring more value to each citizen. The development of a smart city, where many problems of a modern city are solved through the application of technologies, is also deemed to create a more convenient and humane living environment.

According to Pham Hong Quat, director general of Vietnam’s National Agency for Technology Entrepreneurship and Commercialisation Development, the spirit of entrepreneurship has not diminished despite the pandemic.

In 2021, many new technology units within smart urban and real estate technology have joined the endeavour to create solutions for real estate management in Vietnam.

“However, this game is not easy. Vietnam needs to be aware of the trends, and startups need to take advantage to create breakthroughs,” Quat said.

According to a research report on real estate in the Vietnamese economy and its role and policy recommendations, released by the Vietnam National Real Estate Association in 2021, startups have a wide range in doing business in this field, with 40 industries and sectors that are closely related to the real estate market, from manufacturing, finance and banking, and construction to tourism and many others.

Meanwhile, Phan Van Hung, head of Smart City and Proptech Villages, said that Vietnam is a fast developing market with a young population where advanced technologies have much room for growth, especially for smart city development.

“Smart cities, however, remain a new field in Vietnam. Therefore, startups must know how to access this field and should learn from other countries and to apply their expertise to the Vietnamese market,” Hung said.

Meanwhile, Assoc. Prof. Dr. Hoang Manh Nguyen, director at the Vietnam Green Urban Research and Development Institute, emphasised that green transport, vehicles, and the environment also must be the most concerned topics in smart city development.

“Advanced technologies will help us to use and recycle energy. At present, our cities and urban areas are focusing on technological solutions for waste treatment, water supply, and traffic improvement,” Nguyen said.

“There are still challenges ahead in applying solutions for development, and startups must improve themselves to meet these,” he added. “I believe that our startups will become familiar and able to create a sustainable ecosystem for developing smart cities in Vietnam.”

The Vietnamese government has issued many supportive policies and opened corridors to create an ecosystem for creative startups. The government’s promotion of smart city development and national digital transformation could be an excellent opportunity for tech startups.

Currently, Vietnam has more than 1,000 organisations capable of supporting startups, including 202 coworking zones, 79 business incubators, and 38 business promotion organisations.

The number of venture capital funds that consider Vietnam a target market or have operations in Vietnam stands currently at 210. Of which, 37 funds have Vietnamese legal entities. Their number has continuously increased over the years.

Digital banks increasingly adopt new technologies to keep pace with consumer expectations

Digital banks are embracing more modern technologies to serve the changing customer behaviours during the Fourth Industrial Revolution.

Digital banks increasingly adopt modern technologies to meet customers’ changing habits
CIMB Bank Vietnam has recently launched its Revi credit card, which utilises video electronic Know Your Customer (video eKYC) – one of the latest banking technologies in Vietnam.

With this new onboarding process, customers can open a credit account completely online. Instead of the traditional face-to-face method, Revi’s account opening process is simplified and takes only four steps and can be done within five minutes.

CIMB staff will make a video call directly with users to verify the information. After completing the registration procedure, a physical card will be delivered to the customer after 3-5 working days. By then, users can activate the card and set spending limits, check for their bank statement, lock and unlock the card, or even reset PIN codes if needed.

The new solution will eliminate the requirement of going to the branch while ensuring security criteria at the same time. CIMB not only manages the onboarding process closely, but also makes sure customers information is strictly confidential.

“Along with the launch of the Revi credit card, we hope to satisfy customers’ needs quickly, conveniently, and immediately. This would contribute to promoting non-cash payments, which the government and the State Bank of Vietnam are encouraging.” a CIMB representative said.

Likewise, digital bank Cake has formed a partnership with BPC’s payment processing provider Radar Payments to scale its offering towards a full suite of digital banking services. This collaboration also represents the first SaaS project that BPC’s Radar Payments has undertaken in Vietnam.

Another digital bank, Übank, has also partnered with Backbase – a global engagement banking platform – leveraging their Backbase-as-a-Service (BaaS) managed cloud service for its platform to enhance the bank’s mobile banking experiences and offerings.

Meanwhile, Timo partnered with SaaS cloud banking platform Mambu to leverage the benefits of a cloud platform as it scales its business to a full-service digital bank. With plans to further grow its ecosystem of strategic partners across different industries to enable maximum convenience for customers, Timo will be relying on Mambu’s agile and responsive cloud platform to continue powering Timo’s development.

Digital banks are accelerating operations in Vietnam to serve the rising demand. The latest “Financial tribes you need to know” report by Mambu reveals that around 85 per cent of Vietnamese banking consumers are more likely to use online and digital banking services compared to 18 months ago. Approximately 90 per cent of respondents use online and digital banking services mostly to pay bills, transfer money, and check account balances.

The report also shows that 87 per cent of local banking customers agreed with the importance of online and digital banking services in a bank or financial institution. Over 80 per cent of respondents prefer to save or invest rather than spend money – the highest rates of all surveyed markets.

With the growing preference for digital banking services among customers, the government also takes action to support the trend. On May 11, Decision No.810/QD-NHNN on approving the plan for the digital transformation of the banking sector by 2025 with orientations towards 2030 was promulgated by the State Bank of Vietnam (SBV) with an ambitious objective to gradually create solid legal foundations for the development of digital bank models, and to set out the roadmap and clearly state nine implementation solutions for digital bank models.

The SBV not only helps credit institutions take the right steps, in line with the general global trend, but also helps accelerate the national digital transformation and brings sustainable and practical values to the country. With this new move, the legal framework and policies in payment-related activities will continue to be improved for the application of new technologies and hopefully introduce a license for registration of digital banks, leading to the booming of this model in Vietnam in the near future.

Low interest rates predicted to remain for last two months of 2021

Low interest rates are predicted to remain in November and December this year.

Although the supportive monetary policy of the State Bank of Vietnam (SBV) will be maintained via low operating interest rates and the credit room is expected to be eased in the near future, a further reduction of interest rates is unlikely due to existing inflationary pressures, said KB Securities.

Moreover, the risk of bad debts increasing in the next few quarters as loans gradually mature may cause commercial banks to maintain a high net interest margin to make room for provisions, thus lending rates are unlikely to be cut.

On the other hand, according to the financial statements of commercial banks, by the end of the third quarter of 2021, the credit growth of listed banks was 7.7per cent year-to-date, of which state-owned banks (except for Agribank) and joint stock commercial banks all recorded positive growth, reaching 7.8 and 8.8 per cent year-to-date respectively.

Commercial banks with good loan growth in the first nine months of 2021 include Techcombank, TPBank, VIB, LienVietPostBank, MB, and MSB.

Notably, the growth of corporate bonds greatly contributed to the 9M21 credit growth of many banks such as Techcombank, VPBank, MB, and TPBank.

In the first nine months of 2021, most joint stock commercial banks have approached their allotted credit growth caps for this year by the SBV.

KB Securities raises its credit growth forecast in 2021 to 12 per cent from 10 per cent.

Thanks to accelerated vaccination programmes in major localities, the pandemic is coming gradually under control, social distancing regulations are gradually lifted and less likely to be tightened again, capital demand will soon recover, corresponding to the recovery in the production and consumption sectors.

In particular, Q3 data shows that the asset quality of commercial banks was not much affected by social distancing, which is the basis for the SBV to soon grant more credit room to banks with good asset quality and capital adequacy ratio. 

Risk management required in consumer finance arena

Consumer finance firms’ performance in Vietnam is deteriorating due to the minimal capital buffer and hazardous nature of such assets – and a pressing need for a credit expansion boost is indicated as a stipulation for consumer finance players to rebound.

Risk management required in consumer finance arena-illustration photo, photo shutterstock
Pre-tax profits for FE Credit in the first nine months of 2021 were only $39.1 million, contributing 7 per cent to the total profit of VPBank. Meanwhile, loan disbursement in the period reached $1.8 billion, down 6.6 per cent on-year.

Along with that, FE Credit’s net profit margin (NIM) also continuously declined to the lowest level since 2018, around 24.2 per cent. The capital adequacy ratio, however, improved dramatically, rising from 17.3 to 21.6 per cent. Capital spending in the first nine months fell to 7.4 from 8.2 per cent in the previous year.

HD Saison’s profit reached $34.6 million, a bit higher than last year’s same period. Despite a slowing in profit growth, it continued to expand its network of transaction points by 1,800 points, bringing the total to 21,313 points nationwide.

HD Saison’s credit recorded a decline for the first time since 2016 with a decrease of up to 13.5 per cent compared to the beginning of the year. Its bad debt ratio skyrocketed to 7.4 per cent after remaining stable at 5.8 per cent in H2. At the end of Q3, the firm’s NIM was 29 per cent.

At the same time, MCredit reported pre-tax profit of $18.8 million, equivalent to a 105 per cent increase on-year. Notwithstanding, in Q3 only, the company’s pre-tax profit was $3.8 million, a significant decline compared to the previous two quarters.

According to Nguyen Quoc Hung, general secretary of the Vietnam Banks Association (VBA), the bad debt ratio of consumer finance companies climbed from 6 to 10 per cent in the first nine months of 2021 due to the pandemic.

“Borrowers of these unsecured consumer loans are low-income workers, employees, and small entrepreneurs who are worst-hit. Many clients’ income has been adversely impacted, resulting in their inability to pay. Others in strict social distancing localities are unable to physically follow required processes. These factors both exert a significant pressure on disbursement and debt collection, leading to overdue debts and high bad debts,” he elaborated.

The consumer finance sector is also confronting other roadblocks because of present legislation. A representative of MCredit requested that the State Bank of Vietnam (SBV) priorities early adjustment of legislation in 2022.

Nguyen Dinh Duc, deputy general director of HD Saison, stated that the average bad debt ratio at consumer finance companies around the world is around 8-10 per cent, and in Vietnam it is currently at 9 per cent because it primarily lends to disadvantaged customers with unstable income. However, the SBV set a target of less than 3 per cent bad debt for consumer financing firms, identical to that of commercial banks, making it harder to offer credit capacity to consumer finance companies.

“Because of the industry’s unique characteristics and distinct operational tasks, it is hard to compare the bad debt percentage of a consumer finance company to that of a bank. As a result, the management agency requires a distinct lane for the consumer finance group,” Duc explained.

In the same vein, Tran Thanh Nu Tuong Vy, deputy CEO of SHB Finance, stated that the SBV’s application of a credit growth rate of 12 per cent annually has given rise to difficulties for consumer finance firms.

New companies with low outstanding loans are likely to hit the credit ceiling in Q4. According to Vy, limiting credit growth while current debts are not recovered for re-lending would raise total outstanding loans, and if new loans cannot be provided, consumer finance businesses will be compelled to increase their provisioning for loan risk management.

Meanwhile, based on the actual execution of digital transformation at financial institutions, a FE Credit representative urged that the government create a new regulatory framework for electronic transactions shortly.

“Furthermore, the VBA and other media channels should coordinate in implementing communication campaigns to facilitate a more comprehensive financial literacy and the crucial role of this industry in repelling black credit and loan sharks,” the representative highlighted. 

Lenders explore new ways to up ownership

Financial institutions are ramping up ownership in securities subsidiaries to tap into new and exciting investment opportunities on the stock market.

At the investor meeting of VPBank last week, deputy general director Luu Thi Thao revealed that the bank is mulling over establishing or acquiring a new securities company to tap into this lucrative sector, and increase cross-selling products for its large customer base.

To mark the 25th birthday of the State Securities Commission of Vietnam (SSC) on November 28, Vietnam Investment Review, in partnership with the SSC, will organise an online seminar on the stock market in Vietnam.

The seminar will take place on November 18 at 8:30-11:30am, with high-profile speakers and attendees from the Ministry of Finance, the SSC, major stock exchanges, listed companies, leading securities companies, and prominent fund management organisations.

Meanwhile, ASC Securities Corporation (ASCS) has recently moved its head office from Ho Chi Minh City to VPBank’s headquarters in Hanoi.

At its recent annual general shareholders’ meeting, ASCS elected the Board of Directors and Supervisory Board for 2021-2026, with both new members of the Supervisory Board, Nguyen Thi Duyen and Hoang Thi Quynh Trang, also holding positions at VPBank.

Along with a fresh capital raising and its renewed organisational structure, ASCS is rumoured to be closely linked with VPBank’s new stock trading project.

In the same vein, Viet A Bank is rumoured to have acquired National Securities Corporation (NSI). The brokerage company has just moved its headquarters to Viet A Bank’s head office.

NSI has also announced tripling its capital from $13 million to $43.5 million by issuing 70 million shares to existing shareholders in 2021.

Viet A Bank was also listed in the NSI’s offering plan as one of the purchasers. Cappella Group, one of the major stakeholder of NSI, is led by Nguyen Van Trong, member of the Board of Directors and acting CEO of Viet A Bank.

Earlier this month, Tien Phong Securities JSC (TPS) – the brokerage arm of TPBank – was officially listed on the Ho Chi Minh City Stock Exchange (HSX), with a reference price of VND28,300 ($1.23) apiece.

TPS, formally Phuong Dong Securities JSC, joined TPBank’s ecosystem in April 2019.

Tran Son Hai, vice chairman of the Board of Directors cum CEO of TPS stated, “Being listed on the HSX shows that we are part of a group of skilled and serious firms working to develop a transparent stock landscape for domestic and international investors alike. This also marks the success of our reorganisation, ushering in a new era of strong and remarkable growth with larger and more sustainable development.”

Hai also added that TPS aims to make it among the top 10 in Vietnam’s stock market in terms of size, market share, revenue, and profit to ensure operating efficiency and deliver the greatest advantages to shareholders.

Since the beginning of the year, more than 30 securities companies have raised capital. Some small-cap securities businesses that were of a low profile a few years ago have also emerged on the radar of deep-pocketed shareholders such as KS Securities, Dai Nam Securities, and DSC Securities.

Other brokerages backed by banks such as ACB Securities, MB Securities, and KS Securities have gained new momentum in the race for capital to intensify competitiveness. Techcom Securities JSC, VietinBank Securities, and Vietcombank Securities are also actively issuing bonds with support from their parent banks.

A securities subsidiary will support banks in the issuance of valuable papers, such as stocks and bonds, to mobilise much-needed capital.

Going against the flow, in late July Sacombank announced ambitions to offload its entire capital in Sacombank Securities JSC. The bank expects to gain around $6.5-7.4 million from the divestment. The move is part of the bank’s comprehensive restructuring strategy, including divestment from ineffective businesses. A representative of Sacombank noted that the bank had not been the parent company of Sacombank Securities JSC since 2011, after subsequent divestments in the preceding year.

Inflation has accelerated in recent months across the globe, including Vietnam. In early 2020 when the pandemic hit, the State Bank of Vietnam (SBV) had adjusted interest rates with three reductions at 1.5-2 per cent, a deep reduction compared to other countries in the region.

In addition to regulating the interest rates of the central bank, the SBV has directed and called on domestic and foreign credit institutions to reduce interest rates for existing and fresh loans. The lending interest rate decreased by 1.66 per cent compared to the pre-pandemic level. The total reduction in interest rates of credit institutions reached $1.3 billion. The interest rate reduction will continue to be reduced from now until the end of the year.

Commercial banks in Vietnam have actively slashed their interest rates by about $86.95 million to help customers ride out the bumps.

However, the hotter-than-anticipated inflation has triggered heated debates over a rate hike.

The monetary policy has two tasks in terms of progressively decreasing interest rates. The first is to manage the central bank’s policy in order to keep inflation under control and the economy stable. The second is the economy’s lifeblood, ensuring that the credit system functions in a way that assures people’s safety and payment ability.

In order to determine if there is still room for further interest rate cuts when assessing the current situation of banking activities and the macro-economy, we assess that in 2021, we could meet inflation’s target of below 4 per cent, which is set by the National Assembly.

By the end of October, inflation increased by 1.81 per cent. However, inflation risks are expected to be under pressure by 2022.

Vietnam is not the only country facing great challenges posed by inflation. Inflation in developed nations, such as in the US, is starting to look unexpected and unwanted. Last week, the US government announced its consumer price index soared 6.2 per cent from a year ago – the biggest 12-month jump within three decades.

Those signals would prompt more rapid tapering and faster rate hikes than expected. Many market participants are now expecting three rate hikes next year.

With the openness of Vietnam’s economy and impressive import-export turnover, Vietnam bears the risk of import inflation. In addition, central banks across the globe are also adjusting their monetary policy, with 65 rate hikes worldwide. Therefore, inflation pressure and monetary policy operating pressure are large. Furthermore, bad debts in the system of credit institutions have also witnessed an upward trajectory.

We previously dealt with the financial crisis in the 2008-2009 period. At the moment, the SBV would thoroughly assess the ongoing development on the inflation front, compare realistic scenarios for policy purposes, as well as come up with a flexible monetary approach.

Throughout the pandemic, banks have used their own financial resources to lower interest rates. When soured debt grows, they must utilise their financial resources to cope with it.

In the worst scenario, credit institutions’ weak performance would adversely impede the ability to pay people and the safety of the whole system. This is an unforgettable lesson from the past when credit growth skyrocketed uncontrollably when we facilitated interest rate support packages in 2010. If not calculated carefully, there is a risk that inflation will return to the same level as in 2011, at around 18 per cent.

As a result, the SBV would continue to ramp up efforts to cut operational expenses in order to lower interest rates, but also ensure the stability of the credit institution system. Simultaneously, we will continue to coordinate with relevant ministries and agencies to determine fair interest rates in support packages based on macroeconomic stability and inflation risk mitigation.

Apparel exports of Binh Duong Province exceed US$2 billion

The Textile and Apparel Association of Binh Duong Province, on November 18, said that despite being affected by the Covid-19 pandemic, garment and textile export turnover was estimated at more than US$2 billion in the first ten months of this year, up 1.4 percent compared to the same period last year, accounting for 7 percent of the province’s total export turnover.

Accordingly, the export turnover of textile and garment products of Binh Duong Province was estimated at $152 million in October, up 241.4 percent over the previous month. The main markets included the US, the EU, South Korea, and Japan. It is forecasted that from now to the end of this year, there will be more orders, and businesses in the industry will gradually recover, speed up production, and continue to increase export value.

According to the Textile and Apparel Association of Binh Duong Province, the above result was obtained in the context of a complicated and prolonged Covid-19 pandemic because local large-scale textile and garment enterprises had paid attention to Covid-19 prevention measures and taken good care of workers. Workers who temporarily left for their hometown to avoid the pandemic have been returning to continue working.

Vietnam stays firm in top 10 remittance recipients in 2021 with US$18.1 billion 

The year 2021 will be the fifth in a row that Vietnam remains in the top 10 in terms of remittance.
Vietnam has moved up one notch to be the world’s eighth-largest remittance recipient with an inflow of US$18.1 billion in 2021, accounting for 4.9% of its GDP while last year the figure was $17.2 billion, according to the World Bank’s latest data.

This will the fifth consecutive year that Vietnam remains in the top 10 in terms of remittance, with the figure being $13.8 billion (2017), $15.9 billion (2018), and $17.2 billion (2019).

India remained the largest recipient globally with an estimated  $87 billion, followed by China and Mexico with $53 billion.

In the East Asian and Pacific region, in 2021, Vietnam ranked third after China and the Philippines ($36 billion) – the world’s fourth-largest recipient.

Nguyen Hoang Minh, deputy director of the State Bank of Vietnam (SBV) in Ho Chi Minh City noted the strong remittance inflow into Vietnam amid the pandemic has had positive impacts on the foreign exchange market.

“A stable US-Vietnam exchange rate would continue to facilitate the Government’s policies favoring businesses and people affected by the pandemic,” he said.

The Vietnamese dong (VND) was among the most stable currencies in Asia, with the USD/VND exchange rate fluctuating around VND23,200-23,250 per US dollar in the first quarter of 2021, around the same as last year. In this regard, other currencies have sharply depreciated against the USD, including JPY (-7.26%), EUR (-4.12%), THB (-4.5%), KRW (-4.19%), and CNY (-0.57%).

Fitch Solutions forecast the VND to average VND23,000/USD, and around VND23,200 in 2022.

Importance of remittance as critical lifeline

On the global scale, the World Bank noted remittances to low- and middle-income countries are projected to have grown a strong 7.3% to reach $589 billion in 2021.

For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) and are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).

This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.

“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the Covid-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” said Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.

Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programs. In the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity.

However, the cost of sending $200 across international borders continued to be too high, averaging 6.4% of the amount transferred in the first quarter of 2021, according to the World Bank’s Remittance Prices Worldwide Database. This is more than double the Sustainable Development Goal target of 3 percent by 2030.

It is most expensive to send money to Sub-Saharan Africa (8%) and cheapest in South Asia (4.6%). Data reveal that costs tend to be higher when remittances are sent through banks than through digital channels or through money transmitters offering cash-to-cash services.

“The immediate impact of the crisis on remittance flows was very deep. The surprising pace of recovery is welcome news. To keep remittances flowing, especially through digital channels, providing access to bank accounts for migrants and remittance service providers remains a key requirement. Policy responses also must continue to be inclusive of migrants especially in the areas of access to vaccines and protection from underpayment,” said Dilip Ratha, lead author of the Brief and head of KNOMAD.

Remittances are projected to continue to grow by 2.6% in 2022 in line with global macroeconomic forecasts. A resurgence of COVID-19 cases and re-imposition of mobility restrictions poses the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries. The rollback of fiscal stimulus and employment-support programs, as economies recover, may also dampen remittance flows.

Vietnamese, Chinese localities step up trade exchange

Trade promotion agencies of the northern border province of Lao Cai and the Chinese province of Zhejiang’s Hangzhou city on November 19 organised an international conference on exports and trade exchange in both virtual and face-to-face forms.

The event gathered 138 enterprises from 15 provinces and cities of Vietnam and nearly 100 businesses from China’s Zhejiang, Tianjin, Shanghai, Beijing, and Yunnan.

Head of Lao Cai’s centre for industrial promotion and trade promotion Ha Duc Binh said the conference aimed to boost trade exchange and commercial cooperation between the localities, offering chances for Vietnamese suppliers, exporters, and logistics businesses to meet partners from Zhejiang and its neighbouring Chinese provinces. Therefore, export cooperation between Vietnam and Zhejiang would be enhanced, he added.

As heard at the conference, transportation by air, road and railway between Vietnam and Zhejiang is very convenient, with goods delivery time between the two sides ranging from one to two days by road and railway.

According to statistics of the General Department of Vietnam Customs, two-way trade between Vietnamese provinces and Zhejiang in 2020 exceeded 8.11 billion USD.

Zhejiang’s major exports to Vietnam include fabric products, textiles; steel frames; velvet, feather; electrical components; machinery and components for the textile and garment sector; paper and ceramic tiles. Meanwhile, it mainly imports from Vietnam textiles; iron and steel; rubber; plastic beads; food; clinker; and limestone.

The trade exchange of agricultural products and fruits between the two sides has so far remained modest./.




Stock market expected to cross current threshold



During the last trading sessions of 2021, the stock market was not particularly active. The effect was being felt of unfavorable news on the macro, the most notable of which was the GDP growth of the whole year at only 2.58%.

Stock market expected to cross current threshold

The news of a new variant of the Covid-19 called Omicron was also detected in a few people in Vietnam. However, despite this turbulent news, the stock market did not react in shock. The VN Index is still moving sideways between 1,480 points to 1,500 points.

Optimistic scenario

The GDP growth rate of 2.58% in 2021 was not a surprise. Even if viewed from a future perspective, this is a positive result, because there have been many poorer growth forecasts before. For example, at the end of October 2021, the World Bank estimated the GDP growth in 2021 in the range of 2% to 2.5%. There are also a few organizations such as UOB Bank that gave 3%, and the optimistic scenario of the General Statistics Office also giving 3%. Therefore, the actual growth rate of 2.58% is still a better result than many organizations predicted, although it is still at a very low level.

However, just when there are no longer any more surprises, the stock market reacts indifferently. In the last trading sessions of 2021, the VN Index went up and down mainly due to the influence of some large-cap stocks. Statistics in the past show that the last week of the market usually grows quite positively due to the impact of maintaining a portfolio value. This year the situation is very different, especially after the growth spread of the second year of Covid-19, where the VN Index increased by about 35%, and it is no longer urgent to support the portfolio, and even profit-taking transactions determine the annual bonus. Therefore, the threshold attained of 1,500 points will still be the historic peak of the market and of 2021.

In fact, indifference to bad news is an important psychological indicator in the market. The sentiment factor and the emotional action of the crowd has always been a part of the market. So when bad news appears, the level of emotional action shows that investor sentiment is not easily swayed, because the more indifferent the market reacts, the stronger the sentiment is. Looking at it from this perspective, the volatile days at the end of 2021 of the stock market ended a wobbly economic year, with a record low growth rate, which is a good sign.

Worst maybe over

There have been many forecasts about a positive recovery of Vietnam’s economy in 2022 along with an initial forecast of a weak growth in 2021. Of course, forecasts will still be affected by many variables, such as whether the Omicron mutation can trigger a more dangerous pandemic wave, but basically the stock market still hopes that the worst is over.

Not only Vietnam’s stock market, but securities around the world are also feeling the same. The more the Omicron mutation spreads in the US, the S&P 500 set a new historic high in the last week of 2021. French, German, and British stocks are all at historic high, although the number of cases of the new strain called Omicron has also increased rapidly. The fact that the VN Index is sticking to the historical threshold of 1,500 points these days is actually an opportunity. The market has a golden opportunity now to hit a new historic high, but what is missing is an expectation to lead.

In the first week of 2022, that expectation may arise when the Extraordinary Session of the National Assembly will take place from 4 January to 11 January 2022, the important content being the consideration of the draft resolution on fiscal and monetary policies to support the implementation of the program on socio-economic recovery and development. This resolution will pave the way for the implementation of the economic stimulus package that the stock market has been waiting for since October 2021.

The market has bet in advance on this stimulus package with a growth of nearly 13% in October and November, which is the time when the VN Index made its historic peak of 1,500 points for the first time. The whole December market stopped accumulating to wait for a confirmation.

Growth forecasts of the stock market in 2022 all consider this economic stimulus package to be a push to create a boom. According to the Vietcombank Securities 2022 outlook report, growth in public spending can have a positive effect on consumer spending and private investment as consumer demand has gradually recovered and a reasonably sized economic stimulus package targeting the right sectors before the Lunar New Year will help Vietnam keep up with world recovery. GDP growth in 2022 may also reach 6.8% to 7.2%.

VNDS also expects that the Government will issue a large-scale economic support package and maintain an easy monetary policy until at least the end of the second quarter of 2022 to promote economic recovery, while GDP is expected to grow by 7.5% in 2022.

Although forecasts are regularly updated and changed based on new variables appearing over time, the above scenarios show that the stock market expectations are well-founded. The market cycle is more closely associated with the cycle of expectations, starting with a response to receive information, followed by a pause to assess the future impact and build expectations then continue an uptrend based on expectations and finally waiting time, even adjusting to confirm expectations. This cycle is often phased out compared to actual figures due to going faster. So it wouldn’t be surprising if the stock market hits a new historic high before the effects of the stimulus policies are actually seen.

The market has a golden opportunity now to hit a new historic high, but what is missing is an expectation to lead. It is expected that the Extraordinary Session of the National Assembly which will take place from 4 January to11 January 2022, will have the main focus on decision to implement the program on socio-economic recovery and development.

Source: SGGP


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HCMC, Mekong Delta develop formal distribution system of farm produce



Vice Chairwoman of HCMC People’s Committee Phan Thi Thang promised to bring goods from the Mekong Delta into wholesale markets and distribution systems in HCMC to support farmers and cooperatives for connection of supply and demand.

 HCMC, Mekong Delta develop formal distribution system of farm produce

In Cao Lanh city in Dong Thap province at the heart of the Mekong Delta, a conference about goods consumption connection between five provinces in the Mekong Delta including Dong Thap, Ben Tre, Vinh Long, Long An, and An Giang, and Ho Chi Minh City was held on January 15, 2022. Vice Chairwoman of Ho Chi Minh City People’s Committee Phan Thi Thang, leaders of provinces, and about 500 enterprises were attending.

Within the framework of the program, one day before yesterday, a delegation from Ho Chi Minh City including more than 60 enterprises led by the Department of Industry and Trade of Ho Chi Minh City visited several gardeners and agro-processing enterprises of some provinces in the Mekong Delta region.

The supply of goods in the Mekong Delta before the Lunar New Year was quite abundant, most of the goods had relatively stable prices, even some fell quite deeply. This situation has never been before.

This year, the complicated development of the Covid-19 epidemic has strongly affected purchasing power. For instance, Cao Lanh District, Dong Thap Province currently has 7,800 hectares of fruit trees, hundreds of thousands of tons of products with diverse and rich varieties such as mangoes, oranges, lemons, guava, and jackfruit put on the market each year.

This year, although it is the peak season of the Tet holidays ( the Lunar New Year), the prices of many types of products are falling deeply, driving farmers into despair. For example, jackfruit price dropped from VND40,000-VND50,000 to VND4,000-VND5,000 a kg; many other fruits also decreased about 20 percent over the same period.

Thanh Binh District in the same province has more than 3,150 hectares of fruit trees, nearly 570 hectares of aquaculture. The price of seafood of all kinds is decreasing by about 20 percent compared to 2021. Worse, an enormous volume of commodities was stockpiled before the Lunar New Year season.

Vice Chairman of Thanh Binh District People’s Committee Mai Van Doi said that over the past time, farmers, as well as many local enterprises, have improved product quality and packaging; however, fresh products have not been still processed, and no enterprises have undertaken consumption of agricultural products.

Quality Manager of San Ha Company Nguyen Huu Tri said that from September 2021, the enterprise signed a contract to purchase livestock and poultry in the Mekong Delta for the whole year 2022 at a relatively stable price.

He added that the Covid-19 epidemic has disrupted the supply chain, leading to an increase in raw materials for livestock and poultry. The company will share difficulties with farmers.

Most of the enterprises, cooperatives, and leaders of the five provinces admitted that farming, production, and processing were still fragmented and had not been linked for mutual development. In particular, in the past time, many businesses have only focused on export, neglecting the domestic market; as a result, trucks got congested in the northern border gate.

Faced with this situation, representatives of the wholesale and retail market system from Ho Chi Minh City proposed that businesses in the Mekong Delta and local departments should create commodity chains that connect local products to retailers and supermarkets.

On the other hand, farmers and businesses need to pay attention to product quality, especially paying attention to the cultivation process, traceability because supermarkets are very strict about product quality and reasonable prices.

Speaking at the conference, Vice Chairman of Ho Chi Minh City People’s Committee Phan Thi Thang assessed that the Mekong Delta has many strengths in agricultural production along with the value chain. However, farmers often tend to produce spontaneously without an understanding of market demand resulting in abundant production.

Therefore, she suggested that leaders of provinces create favorable conditions for manufacturing and exporting enterprises in Ho Chi Minh City to boost investment in projects to build material areas for a stable source of goods, traceability, reputable brand name, agricultural products with good quality. Moreover, enterprises should have sale contracts at international border gates and main border gates; thereby, creating a new, large-scale, stable, and long-term market area for enterprises in HCMC and provinces.

Source: SGGP


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E-commerce – important pillar of Vietnam’s digital economic development



The Fourth Industrial Revolution is taking place around the world with a boom in digital technology, creating great opportunities for but also challenges to the development of each country, enterprise, and person.

E-commerce - important pillar of Vietnam’s digital economic development hinh anh 1

E-commerce has proved to be an increasingly useful tool for enterprises to surmount difficulties and grasp chances (Illustrative photo: VNA)

Vietnam’s digital economy has been growing at the fastest pace in ASEAN, about 38 percent annually compared to the region’s average of 33 percent since 2015. The country expects the digital economy will make up 20 percent of its GDP and at least 10 percent in each sector.

Vietnam’s digital economy posts fastest growth in region

In a recent interview granted to the Vietnam News Agency, Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan said local e-commerce has been thriving, playing an important role in economic development as well as in the future of Vietnam’s digital economy. E-commerce development is an inevitable trend in the country, and the COVID-19 pandemic serves as a catalyst for this trend to proceed faster and more strongly.

Despite the pandemic’s adverse impacts in 2020, e-commerce in Vietnam still made great strides to become one of the fastest growing markets in Southeast Asia.

According to the Vietnam E-commerce White Book, e-commerce expanded by 18 percent in 2020 to reach 11.8 billion USD, making the country the only in Southeast Asia to post a double-digit growth rate in this regard. Estimates by some major businesses in the world like Google, Temasek, and Bain & Company indicate that the digital economy of Vietnam is likely to top 52 billion USD and rank third in ASEAN by 2025.

Amid the resurgence of COVID-19 in 2021, e-commerce has proved to be an increasingly useful tool for enterprises to surmount difficulties and grasp chances generated by new demand in the market. Local consumers are strongly shifting from the traditional in-person shopping to online method via electronic platforms.

A survey by the Ministry of Industry and Trade showed that Vietnam had 49.3 million online shoppers in 2020, compared to 32.7 million in 2016.

Hanoi and Ho Chi Minh City are among the largest cities in terms of digital economic development in the region. In HCM City alone, there are currently 567 e-commerce platforms, over 20,680 websites, and 134 apps. Although the lingering COVID-19 pandemic has hindered the flow of goods, many e-commerce platforms and websites still posted fast growth.

Thanks to the digital economy, business activities have become vibrant, from advertising on social networks (Facebook, Instagram), entertainment (Netflix, Pinterest), transport (Uber, Grab, GoViet) to wholesale and retail (Lazada, Shopee).

Vietnam has emerged as one of the largest regional recipients of investment into the companies operating on IT platforms and the internet such as MoMo, Sendo, and Topica, helping turn it into an attractive destination for domestic and foreign investors.

Transboundary e-commerce – useful distribution channel for enterprises to expand market

E-commerce helps people purchase items from international markets via the internet and become “global consumers”. It also assists individuals and businesses to introduce and deliver their products to international buyers.

The engagement in the online export – import system and stages of transboundary e-commerce will generate opportunities for Vietnamese firms to perfect their products, improve capacity, and make Vietnamese brands popular among consumers around the world.

To help boost the sale of Vietnamese goods via transboundary e-commerce, the Vietnam E-commerce and Digital Economy Agency (iDEA) has launched the Vietnam National Pavilion on, an international e-commerce platform. Its partners like Vinanutrifood, Viettel Post, VPBank, and Visa also unveiled practical policies related to marketing, transport, and lending interest rates to support Vietnamese manufacturers to carry out this programme.

The Ministry of Industry and Trade has been developing and applying an array of measures such as a certified e-contract authority, guaranteed payment infrastructure for e-commerce, and a platform for managing the e-commerce product flow, which will serve as important bases for the ministry to assist e-commerce platforms and businesses using e-commerce, thus facilitating the healthy, transparent, and sustainable development of the market.

Talking about transboundary e-commerce, iDEA Director Dang Hoang Hai said it is relatively new to enterprises in Vietnam but also the start of a long journey with much needing to be done by both authorities and companies.

He expressed his belief that thanks to joint efforts by the ministry and others, central agencies, localities, and the business community, Vietnamese pavilions on foreign e-commerce platforms will be opened soon and prove effective.

Highlighting the benefits from transboundary e-commerce, Nguyen Thi Diem Hang, Chairwoman of the Board of Director of the Vietnam Organic Nutrition Food JSC (Vinanutrifood), said joining the national pavilion helps popularise the image and brand of Vietnam in the global market. It also supports Vietnamese firms to seek exporting and importing partners and build up foreign consumers’ trust in Vietnamese goods.

Developing healthy e-commerce market in Vietnam

Grasping trends and good practices of digital transformation in trade will help promote innovation in Vietnamese enterprises. On November 22, 2021, the Prime Minister issued a decision approving a plan to step up the IT application and digital transformation in trade promotion during 2021 – 2030.

However, the ministry’s Competition and Consumer Authority pointed out that e-commerce growth has also been accompanied by the surge in wrongdoings related to consumers’ interests. Data show that there are about 500 – 2,000 complaints from consumers every year, mostly about leaks of buyers’ information and scams by sellers.

To create a legal framework for protecting consumers in the e-commerce market, the Government issued a decree that amended and supplemented another on e-commerce released in 2013.

According to the new decree, sellers must publicise information about products as well as business licences and related certificates when doing business on e-commerce platforms. Besides, business activities on social networks like Facebook, Zalo, and Instagram were also placed under management.

The ASEAN Agreement on Electronic Commerce, signed in Hanoi on January 22, 2019 and taking effect on December 2 last year, set up common principles and rules for facilitating e-commerce development in the region and enhancing the rule enforcement capacity.

The deal implementation is expected to help revive the regional economy in the post-pandemic period.

Deputy Minister Tan said in the “new normal” context, e-commerce has increasingly shown its indispensable role in society when enterprises and organisations must swiftly apply digital transformation solutions to their business and management activities like switching to multi-channel retailing and using smart order management and logistics tools.

With huge market potential and the Party and State’s favourable policies, e-commerce is expected to be a contributor to the economic recovery in Vietnam when the country is moving to safely adapt to the COVID-19 pandemic.

E-commerce has been present in almost all production and business sectors, helping boost economic development. However, it is still facing a number of challenges related to consumers’ trust in items sold online, delivery and payment methods, and information security. Given this, the Government and relevant agencies should take appropriate actions to protect consumers and fuel e-commerce in the time ahead./.

Source: VNA


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